U.S. Stocks Move Sharply Lower As Inflation Data Adds To Interest Rate Concerns

(RTTNews) - Stocks moved sharply lower in early trading on Friday and remained firmly negative throughout the session. With the steep drop on the day, the Dow fell to a two-month closing low, while the S&P 500 dropped to its lowest closing level in over a month.

The major averages all posted steep losses on the day. The Dow slumped 336.99 points or 1.0 percent to 32,816.92, the Nasdaq plunged 195.46 points or 1.7 percent to 11,394.94 and the S&P 500 tumbled 42.28 points or 1.1 percent to 3,970.04.

For the holiday-shortened week, the S&P 500 dove by 2.7 percent, while the Dow and the Nasdaq plummeted by 3.0 percent and 3.3 percent, respectively.

The early sell-off on Wall Street came following the release of a report from the Commerce Department showing an unexpected acceleration in the annual rate of growth by core consumer prices in the month of January.

The report said annual growth by core consumer prices, which exclude food and energy prices, accelerated to 4.7 percent in January from an upwardly revised 4.6 percent in December.

Economists had expected the annual rate of growth by core consumer prices to slow to 4.3 percent from the 4.4 percent originally reported for the previous month.

Including food and energy prices, consumer price growth also accelerated to 5.4 percent in January from 5.3 percent in December. The rate of growth was expected to slow to 4.9 percent.

The unexpected acceleration in core consumer price growth added to recent concerns about the outlook for interest rates.

Paul Ashworth, Chief North America Economist at Capital Economics, called the data "another sign that the Fed might have to leave its policy rate higher for longer."

Meanwhile, traders largely shrugged off separate reports showing a surge in new home sales and a slightly bigger than previously estimated improvement in consumer sentiment.

Sector News

Networking stocks turned in some of the worst performances on the day, with the NYSE Arca Networking Index plunging by 2.5 percent to its lowest closing level in a month.

Substantial weakness was also visible among software stocks, as reflected by the 2.3 percent slump by the Dow Jones U.S. Software Index

Adobe (ADBE) is posting a steep loss after a report from Bloomberg said the Justice Department is preparing an antitrust lawsuit seeking to block the company's $20 billion acquisition of startup Figma.

Steel stocks also saw considerable weakness amid concerns about the outlook for demand, dragging the NYSE Arca Steel Index down by 1.9 percent.

Semiconductor, commercial real estate and biotechnology stocks also showed notable moves to the downside, while oil service and chemical stocks bucked the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Friday. Japan's Nikkei 225 Index jumped 1.3 percent following the holiday on Thursday, while Hong Kong's Hang Seng Index tumbled by 1.7 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.4 percent, the German DAX Index and the French CAC 40 Index plunged by 1.7 percent and 1.8 percent, respectively.

In the bond market, treasuries pulled back sharply after moving higher over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 7 basis points to 3.949 percent.

Looking Ahead

Economic data may continue to drive trading next week, with traders likely to keep an eye on reports on durable goods orders, consumer confidence and manufacturing and service sector activity.